diff --git a/.babelrc b/.babelrc
new file mode 100644
index 000000000000..5a6a8f03c43a
--- /dev/null
+++ b/.babelrc
@@ -0,0 +1,7 @@
+{
+  "plugins": [
+    "syntax-trailing-function-commas",
+    "transform-flow-strip-types"
+  ],
+  "retainLines": true
+}
diff --git a/examples/react/package.json b/examples/react/package.json
index 833c43c17b2d..2628bf6d9407 100644
--- a/examples/react/package.json
+++ b/examples/react/package.json
@@ -1,7 +1,7 @@
 {
   "dependencies": {
-    "react": "~0.14.0",
-    "react-dom": "~0.14.0"
+    "react": "~15.2.0",
+    "react-dom": "~15.2.0"
   },
   "devDependencies": {
     "babel-jest": "*",
diff --git a/integration_tests/__tests__/snapshot-test.js b/integration_tests/__tests__/snapshot-test.js
index 9d85ae364ffc..03a24f1dca15 100644
--- a/integration_tests/__tests__/snapshot-test.js
+++ b/integration_tests/__tests__/snapshot-test.js
@@ -26,7 +26,7 @@ const originalTestPath = path.resolve(
   __dirname,
   '../snapshot/__tests__/snapshot-test.js'
 );
-const originalTestContent = fs.readFileSync(originalTestPath, 'utf-8');
+const originalTestContent = fs.readFileSync(originalTestPath, 'utf8');
 const copyOfTestPath = originalTestPath.replace('.js', '_copy.js');
 
 const snapshotEscapeDir =
@@ -49,7 +49,7 @@ const fileExists = filePath => {
 const getSnapshotOfCopy = () => {
   const exports = Object.create(null);
   // eslint-disable-next-line no-eval
-  eval(fs.readFileSync(snapshotOfCopy, 'utf-8'));
+  eval(fs.readFileSync(snapshotOfCopy, 'utf8'));
   return exports;
 };
 
diff --git a/package.json b/package.json
index 81c886b59730..c7299682dfc5 100644
--- a/package.json
+++ b/package.json
@@ -24,6 +24,7 @@
     "clean": "rm -rf ./packages/*/node_modules; npm run build-clean",
     "lint": "eslint .",
     "postinstall": "node ./scripts/postinstall.js && node ./scripts/build.js",
+    "publish": "npm run build-clean && npm run build && lerna publish",
     "t": "node ./scripts/test.js",
     "test": "npm run typecheck && npm run lint && npm run build && npm run t",
     "typecheck": "flow check",
diff --git a/packages/babel-jest/.npmignore b/packages/babel-jest/.npmignore
new file mode 100644
index 000000000000..85e48fe7b0a4
--- /dev/null
+++ b/packages/babel-jest/.npmignore
@@ -0,0 +1,3 @@
+**/__mocks__/**
+**/__tests__/**
+src
diff --git a/packages/babel-plugin-jest-hoist/.babelrc b/packages/babel-plugin-jest-hoist/.babelrc
index f18db8331b36..0c9c840a4ff1 100644
--- a/packages/babel-plugin-jest-hoist/.babelrc
+++ b/packages/babel-plugin-jest-hoist/.babelrc
@@ -1,3 +1,3 @@
 {
-  "presets": ["es2015", {plugins: ["./"]}]
+  "presets": ["es2015", {"plugins": ["./"]}]
 }
diff --git a/packages/babel-plugin-jest-hoist/.npmignore b/packages/babel-plugin-jest-hoist/.npmignore
index 50d0c59cfb8c..85e48fe7b0a4 100644
--- a/packages/babel-plugin-jest-hoist/.npmignore
+++ b/packages/babel-plugin-jest-hoist/.npmignore
@@ -1,2 +1,3 @@
-__tests__/
-__test_modules__/
+**/__mocks__/**
+**/__tests__/**
+src
diff --git a/packages/babel-plugin-jest-hoist/package.json b/packages/babel-plugin-jest-hoist/package.json
index 82fa31531b47..f403b7b8d52f 100644
--- a/packages/babel-plugin-jest-hoist/package.json
+++ b/packages/babel-plugin-jest-hoist/package.json
@@ -12,7 +12,7 @@
     "react": "^0.14.0"
   },
   "jest": {
-    "rootDir": "./build",
+    "rootDir": "./src",
     "scriptPreprocessor": "../../babel-jest",
     "testEnvironment": "node"
   },
diff --git a/packages/babel-plugin-jest-hoist/src/index.js b/packages/babel-plugin-jest-hoist/src/index.js
index f7e1c54809a7..b06b89a0ee24 100644
--- a/packages/babel-plugin-jest-hoist/src/index.js
+++ b/packages/babel-plugin-jest-hoist/src/index.js
@@ -14,10 +14,12 @@ function invariant(condition, message) {
   }
 }
 
-// We allow `jest`, `require`, all default Node.js globals and all ES2015
-// built-ins to be used inside of a `jest.mock` factory.
+// We allow `jest`, `expect`, `require`, all default Node.js globals and all
+// ES2015 built-ins to be used inside of a `jest.mock` factory.
+// We also allow variables prefixed with `mock` as an escape-hatch.
 const WHITELISTED_IDENTIFIERS = {
   jest: true,
+  expect: true,
   require: true,
   Infinity: true,
   NaN: true,
@@ -103,12 +105,16 @@ FUNCTIONS.mock = args => {
 
       if (!found) {
         invariant(
-          scope.hasGlobal(name) && WHITELISTED_IDENTIFIERS[name],
-          'The second argument of `jest.mock()` is not allowed to ' +
-          'reference any outside variables.\n' +
+          (scope.hasGlobal(name) && WHITELISTED_IDENTIFIERS[name]) ||
+          /^mock/.test(name),
+          'The module factory of `jest.mock()` is not allowed to ' +
+          'reference any out-of-scope variables.\n' +
           'Invalid variable access: ' + name + '\n' +
           'Whitelisted objects: ' +
-          Object.keys(WHITELISTED_IDENTIFIERS).join(', ') + '.',
+          Object.keys(WHITELISTED_IDENTIFIERS).join(', ') + '.\n' +
+          'Note: This is a precaution to guard against uninitialized mock ' +
+          'variables. If it is ensured that the mock is required lazily, ' +
+          'variable names prefixed with `mock` are permitted.',
         );
       }
     }
diff --git a/packages/babel-preset-jest/.npmignore b/packages/babel-preset-jest/.npmignore
new file mode 100644
index 000000000000..85e48fe7b0a4
--- /dev/null
+++ b/packages/babel-preset-jest/.npmignore
@@ -0,0 +1,3 @@
+**/__mocks__/**
+**/__tests__/**
+src
diff --git a/packages/jest-changed-files/.npmignore b/packages/jest-changed-files/.npmignore
index 47a78158e488..85e48fe7b0a4 100644
--- a/packages/jest-changed-files/.npmignore
+++ b/packages/jest-changed-files/.npmignore
@@ -1,3 +1,3 @@
-__mocks__/
-__tests__/
+**/__mocks__/**
+**/__tests__/**
 src
diff --git a/packages/jest-changed-files/package.json b/packages/jest-changed-files/package.json
index a30d9b12f358..13ffce636e7e 100644
--- a/packages/jest-changed-files/package.json
+++ b/packages/jest-changed-files/package.json
@@ -11,7 +11,8 @@
     "rimraf": "^2.5.2"
   },
   "jest": {
-    "rootDir": "./build",
+    "rootDir": "./src",
+    "scriptPreprocessor": "../../babel-jest",
     "testEnvironment": "node"
   },
   "scripts": {
diff --git a/packages/jest-cli/.npmignore b/packages/jest-cli/.npmignore
index e31125afcece..85e48fe7b0a4 100644
--- a/packages/jest-cli/.npmignore
+++ b/packages/jest-cli/.npmignore
@@ -1,3 +1,3 @@
-__tests__
-__mocks__
+**/__mocks__/**
+**/__tests__/**
 src
diff --git a/packages/jest-cli/package.json b/packages/jest-cli/package.json
index 9c52730622de..54f6d82e3c5b 100644
--- a/packages/jest-cli/package.json
+++ b/packages/jest-cli/package.json
@@ -18,7 +18,6 @@
     "jest-util": "^13.2.2",
     "jest-snapshot": "^13.2.3",
     "json-stable-stringify": "^1.0.0",
-    "lodash.template": "^4.2.4",
     "sane": "^1.2.0",
     "which": "^1.1.1",
     "worker-farm": "^1.3.1",
@@ -48,8 +47,9 @@
     "test": "./bin/jest.js"
   },
   "jest": {
-    "rootDir": "./build",
-    "testEnvironment": "jest-environment-node"
+    "rootDir": "./src",
+    "scriptPreprocessor": "../../babel-jest",
+    "testEnvironment": "node"
   },
   "bugs": {
     "url": "https://github.com/facebook/jest/issues"
diff --git a/packages/jest-cli/src/CoverageCollector.js b/packages/jest-cli/src/CoverageCollector.js
deleted file mode 100644
index ceabb3ada254..000000000000
--- a/packages/jest-cli/src/CoverageCollector.js
+++ /dev/null
@@ -1,80 +0,0 @@
-/**
- * Copyright (c) 2014-present, Facebook, Inc. All rights reserved.
- *
- * This source code is licensed under the BSD-style license found in the
- * LICENSE file in the root directory of this source tree. An additional grant
- * of patent rights can be found in the PATENTS file in the same directory.
- */
-'use strict';
-
-const CoverageInstrumentor = require('cover/instrument').Instrumentor;
-const fs = require('graceful-fs');
-const path = require('path');
-
-const COVERAGE_TEMPLATE_PATH = path.join(__dirname, 'coverage.template');
-
-let _memoizedCoverageTemplate = null;
-
-function _getCoverageTemplate() {
-  if (_memoizedCoverageTemplate === null) {
-    _memoizedCoverageTemplate = require('lodash.template')(
-      fs.readFileSync(COVERAGE_TEMPLATE_PATH, 'utf8'),
-    );
-  }
-  return _memoizedCoverageTemplate;
-}
-
-class CoverageCollector {
-
-  constructor(sourceText) {
-    this._coverageDataStore = {};
-    this._instrumentedSourceText = null;
-    this._instrumentor = new CoverageInstrumentor();
-    this._origSourceText = sourceText;
-  }
-
-  getCoverageDataStore() {
-    return this._coverageDataStore;
-  }
-
-  getInstrumentedSource(storageVarName) {
-    if (this._instrumentedSourceText === null) {
-      this._instrumentedSourceText = _getCoverageTemplate()({
-        instrumented: this._instrumentor,
-        coverageStorageVar: storageVarName,
-        source: this._instrumentor.instrument(this._origSourceText),
-      });
-    }
-    return this._instrumentedSourceText;
-  }
-
-  extractRuntimeCoverageInfo() {
-    const instrumentationInfo = this._instrumentor.objectify();
-    const coverageInfo = {
-      coveredSpans: [],
-      uncoveredSpans: [],
-      sourceText: this._origSourceText,
-    };
-
-    let nodeIndex;
-
-    // Find all covered spans
-    for (nodeIndex in this._coverageDataStore.nodes) {
-      coverageInfo.coveredSpans.push(instrumentationInfo.nodes[nodeIndex].loc);
-    }
-
-    // Find all definitely uncovered spans
-    for (nodeIndex in instrumentationInfo.nodes) {
-      if (!this._coverageDataStore.nodes.hasOwnProperty(nodeIndex)) {
-        coverageInfo.uncoveredSpans.push(
-          instrumentationInfo.nodes[nodeIndex].loc,
-        );
-      }
-    }
-
-    return coverageInfo;
-  }
-
-}
-
-module.exports = CoverageCollector;
diff --git a/packages/jest-config/.npmignore b/packages/jest-config/.npmignore
index e31125afcece..85e48fe7b0a4 100644
--- a/packages/jest-config/.npmignore
+++ b/packages/jest-config/.npmignore
@@ -1,3 +1,3 @@
-__tests__
-__mocks__
+**/__mocks__/**
+**/__tests__/**
 src
diff --git a/packages/jest-config/package.json b/packages/jest-config/package.json
index 352a396d3c13..2be8b48435c8 100644
--- a/packages/jest-config/package.json
+++ b/packages/jest-config/package.json
@@ -22,6 +22,7 @@
   },
   "jest": {
     "rootDir": "./build",
+    "scriptPreprocessor": "../../babel-jest",
     "testEnvironment": "jest-environment-node"
   },
   "scripts": {
diff --git a/packages/jest-config/src/IstanbulCollector.js b/packages/jest-config/src/IstanbulCollector.js
index 5e880239957e..af29c730db8f 100644
--- a/packages/jest-config/src/IstanbulCollector.js
+++ b/packages/jest-config/src/IstanbulCollector.js
@@ -4,28 +4,36 @@
 * This source code is licensed under the BSD-style license found in the
 * LICENSE file in the root directory of this source tree. An additional grant
 * of patent rights can be found in the PATENTS file in the same directory.
+*
+* @flow
 */
 'use strict';
 
+import type {Path} from 'types/Config';
+
 const istanbul = require('istanbul');
 
 class IstanbulCollector {
 
-  constructor(sourceText, filename) {
-    const instr = new istanbul.Instrumenter();
-    this._coverageDataStore = {};
-    this._instrumentor = instr;
-    this._origSourceText = sourceText;
-    this._instrumentedSourceText = instr.instrumentSync(sourceText, filename);
+  _coverageDataStore: Object;
+
+  constructor() {
+    this._coverageDataStore = Object.create(null);
   }
 
   getCoverageDataStore() {
     return this._coverageDataStore;
   }
 
-  getInstrumentedSource(storageVarName) {
-    return this._instrumentedSourceText + storageVarName + '.coverState=' +
-           this._instrumentor.currentState.trackerVar + ';';
+  getInstrumentedSource(
+    sourceText: string,
+    filename: Path,
+    storageVarName: string,
+  ) {
+    const instrumentor = new istanbul.Instrumenter();
+    const source = instrumentor.instrumentSync(sourceText, filename);
+    const tracker = instrumentor.currentState.trackerVar;
+    return source + storageVarName + '.coverState=' + tracker + ';';
   }
 
   extractRuntimeCoverageInfo() {
diff --git a/packages/jest-config/src/reporters/IstanbulTestReporter.js b/packages/jest-config/src/reporters/IstanbulTestReporter.js
index 0143a2d741a5..f34b0a86ba74 100644
--- a/packages/jest-config/src/reporters/IstanbulTestReporter.js
+++ b/packages/jest-config/src/reporters/IstanbulTestReporter.js
@@ -9,19 +9,31 @@
 */
 'use strict';
 
+import type {Config} from 'types/Config';
+import type {AggregatedResult, TestResult} from 'types/TestResult';
+import type {Process} from 'types/Process';
+
 const DefaultTestReporter = require('./DefaultTestReporter');
+
 const chalk = require('chalk');
 const istanbul = require('istanbul');
-const collector = new istanbul.Collector();
-const testCollectors = Object.create(null);
-const reporter = new istanbul.Reporter();
 
 const FAIL_COLOR = chalk.bold.red;
 
-import type {Config} from 'types/Config';
-import type {AggregatedResult, TestResult} from 'types/TestResult';
-
 class IstanbulTestReporter extends DefaultTestReporter {
+
+  _collector: istanbul.Collector;
+  _reporter: istanbul.Reporter;
+  _testCollectors: Object;
+
+  constructor(customProcess: Process) {
+    super(customProcess);
+
+    this._collector = new istanbul.Collector();
+    this._testCollectors = Object.create(null);
+    this._reporter = new istanbul.Reporter();
+  }
+
   onTestResult(
     config: Config,
     testResult: TestResult,
@@ -30,27 +42,29 @@ class IstanbulTestReporter extends DefaultTestReporter {
     super.onTestResult(config, testResult, aggregatedResults);
 
     if (config.collectCoverage && testResult.coverage) {
-      collector.add(testResult.coverage);
-      if (!testCollectors[testResult.testFilePath]) {
-        testCollectors[testResult.testFilePath] = new istanbul.Collector();
+      const testFilePath = testResult.testFilePath;
+      this._collector.add(testResult.coverage);
+      if (!this._testCollectors[testFilePath]) {
+        this._testCollectors[testFilePath] = new istanbul.Collector();
       }
-      testCollectors[testResult.testFilePath].add(testResult.coverage);
+      this._testCollectors[testFilePath].add(testResult.coverage);
     }
   }
 
   onRunComplete(config: Config, aggregatedResults: AggregatedResult) {
     aggregatedResults.success = super.onRunComplete(config, aggregatedResults);
 
+    const reporter = this._reporter;
     if (config.collectCoverage) {
       try {
         if (config.coverageDirectory) {
           reporter.dir = config.coverageDirectory;
         }
         reporter.addAll(config.coverageReporters);
-        reporter.write(collector, true, () => {});
+        reporter.write(this._collector, true, () => {});
       } catch (e) {}
       if (config.coverageThreshold) {
-        const rawCoverage = collector.getFinalCoverage();
+        const rawCoverage = this._collector.getFinalCoverage();
         const globalResults = istanbul.utils.summarizeCoverage(rawCoverage);
 
         function check(name, thresholds, actuals) {
@@ -97,16 +111,16 @@ class IstanbulTestReporter extends DefaultTestReporter {
     return aggregatedResults.success;
   }
 
-  static getReporter() {
-    return reporter;
+  getReporter() {
+    return this._reporter;
   }
 
-  static getCollector() {
-    return collector;
+  getCollector() {
+    return this._collector;
   }
 
-  static getTestCollectors() {
-    return testCollectors;
+  getTestCollectors() {
+    return this._testCollectors;
   }
 }
 
diff --git a/packages/jest-environment-jsdom/.npmignore b/packages/jest-environment-jsdom/.npmignore
index e31125afcece..85e48fe7b0a4 100644
--- a/packages/jest-environment-jsdom/.npmignore
+++ b/packages/jest-environment-jsdom/.npmignore
@@ -1,3 +1,3 @@
-__tests__
-__mocks__
+**/__mocks__/**
+**/__tests__/**
 src
diff --git a/packages/jest-environment-jsdom/package.json b/packages/jest-environment-jsdom/package.json
index a40152785999..637b6c3dc7f8 100644
--- a/packages/jest-environment-jsdom/package.json
+++ b/packages/jest-environment-jsdom/package.json
@@ -8,7 +8,7 @@
   "license": "BSD-3-Clause",
   "main": "build/index.js",
   "dependencies": {
-    "jsdom": "^9.2.1",
+    "jsdom": "^9.4.0",
     "jest-util": "^13.2.2"
   }
 }
diff --git a/packages/jest-environment-jsdom/src/index.js b/packages/jest-environment-jsdom/src/index.js
index 07c221022416..2e7d1ed49649 100644
--- a/packages/jest-environment-jsdom/src/index.js
+++ b/packages/jest-environment-jsdom/src/index.js
@@ -10,6 +10,7 @@
 
 import type {Config} from 'types/Config';
 import type {Global} from 'types/Global';
+import type {Script} from 'vm';
 
 const FakeTimers = require('jest-util').FakeTimers;
 const installCommonGlobals = require('jest-util').installCommonGlobals;
@@ -45,9 +46,9 @@ class JSDOMEnvironment {
     this.fakeTimers = null;
   }
 
-  runSourceText(sourceText: string, filename: string): ?any {
+  runScript(script: Script): ?any {
     if (this.global) {
-      return this.global.eval(sourceText + '\n//# sourceURL=' + filename);
+      return require('jsdom').evalVMScript(this.global, script);
     }
     return null;
   }
diff --git a/packages/jest-environment-node/.npmignore b/packages/jest-environment-node/.npmignore
index e31125afcece..85e48fe7b0a4 100644
--- a/packages/jest-environment-node/.npmignore
+++ b/packages/jest-environment-node/.npmignore
@@ -1,3 +1,3 @@
-__tests__
-__mocks__
+**/__mocks__/**
+**/__tests__/**
 src
diff --git a/packages/jest-environment-node/package.json b/packages/jest-environment-node/package.json
index edb08db03dbb..66bba13e8175 100644
--- a/packages/jest-environment-node/package.json
+++ b/packages/jest-environment-node/package.json
@@ -11,7 +11,8 @@
     "jest-util": "^13.2.2"
   },
   "jest": {
-    "rootDir": "./build",
+    "rootDir": "./src",
+    "scriptPreprocessor": "../../babel-jest",
     "testEnvironment": "node"
   },
   "scripts": {
diff --git a/packages/jest-environment-node/src/index.js b/packages/jest-environment-node/src/index.js
index 36560a7e9bb6..863a6dd1922c 100644
--- a/packages/jest-environment-node/src/index.js
+++ b/packages/jest-environment-node/src/index.js
@@ -11,6 +11,7 @@
 
 import type {Config} from 'types/Config';
 import type {Global} from 'types/Global';
+import type {Script} from 'vm';
 
 const FakeTimers = require('jest-util').FakeTimers;
 const installCommonGlobals = require('jest-util').installCommonGlobals;
@@ -46,12 +47,9 @@ class NodeEnvironment {
     this.fakeTimers = null;
   }
 
-  runSourceText(sourceText: string, filename: string): ?any {
+  runScript(script: Script): ?any {
     if (this.global) {
-      return vm.runInContext(sourceText, this.global, {
-        filename,
-        displayErrors: false,
-      });
+      return script.runInContext(this.global);
     }
     return null;
   }
diff --git a/packages/jest-haste-map/.npmignore b/packages/jest-haste-map/.npmignore
index e31125afcece..85e48fe7b0a4 100644
--- a/packages/jest-haste-map/.npmignore
+++ b/packages/jest-haste-map/.npmignore
@@ -1,3 +1,3 @@
-__tests__
-__mocks__
+**/__mocks__/**
+**/__tests__/**
 src
diff --git a/packages/jest-haste-map/package.json b/packages/jest-haste-map/package.json
index cd281d40ad42..24419392b956 100644
--- a/packages/jest-haste-map/package.json
+++ b/packages/jest-haste-map/package.json
@@ -13,7 +13,8 @@
     "worker-farm": "^1.3.1"
   },
   "jest": {
-    "rootDir": "./build",
+    "rootDir": "./src",
+    "scriptPreprocessor": "../../babel-jest",
     "testEnvironment": "node"
   },
   "scripts": {
diff --git a/packages/jest-haste-map/src/__tests__/index-test.js b/packages/jest-haste-map/src/__tests__/index-test.js
index 57363478e81d..3f018b98d24d 100644
--- a/packages/jest-haste-map/src/__tests__/index-test.js
+++ b/packages/jest-haste-map/src/__tests__/index-test.js
@@ -36,7 +36,7 @@ jest.mock('../crawlers/watchman', () =>
   jest.fn((roots, extensions, ignore, data) => {
     data.clocks = mockClocks;
 
-    const list = changedFiles || mockFs;
+    const list = mockChangedFiles || mockFs;
     for (const file in list) {
       if (new RegExp(roots.join('|')).test(file) && !ignore(file)) {
         if (list[file]) {
@@ -52,18 +52,18 @@ jest.mock('../crawlers/watchman', () =>
 );
 
 const cacheFilePath = '/cache-file';
-let H;
-let HasteMap;
-let changedFiles;
 let consoleWarn;
 let defaultConfig;
 let fs;
+let H;
+let HasteMap;
+let mockChangedFiles;
 let mockClocks;
 let mockFs;
 let object;
 let readFileSync;
-let writeFileSync;
 let workerFarmMock;
+let writeFileSync;
 
 describe('HasteMap', () => {
 
@@ -108,18 +108,18 @@ describe('HasteMap', () => {
       '/vegetables': 'c:fake-clock:2',
     });
 
-    changedFiles = null;
+    mockChangedFiles = null;
 
     fs = require('graceful-fs');
     readFileSync = fs.readFileSync;
     writeFileSync = fs.writeFileSync;
     fs.readFileSync = jest.fn((path, options) => {
-      expect(options).toBe('utf-8');
+      expect(options).toBe('utf8');
 
       // A file change can be triggered by writing into the
-      // changedFiles object.
-      if (changedFiles && (path in changedFiles)) {
-        return changedFiles[path];
+      // mockChangedFiles object.
+      if (mockChangedFiles && (path in mockChangedFiles)) {
+        return mockChangedFiles[path];
       }
 
       if (mockFs[path]) {
@@ -129,7 +129,7 @@ describe('HasteMap', () => {
       throw new Error(`Cannot read path '${path}'.`);
     });
     fs.writeFileSync = jest.fn((path, data, options) => {
-      expect(options).toBe('utf-8');
+      expect(options).toBe('utf8');
       mockFs[path] = data;
     });
 
@@ -354,7 +354,7 @@ describe('HasteMap', () => {
       fs.readFileSync.mockClear();
 
       // Explicitly mock that no files have changed.
-      changedFiles = Object.create(null);
+      mockChangedFiles = Object.create(null);
 
       // Watchman would give us different clocks.
       mockClocks = object({
@@ -364,7 +364,7 @@ describe('HasteMap', () => {
 
       return new HasteMap(defaultConfig).build().then(data => {
         expect(fs.readFileSync.mock.calls.length).toBe(1);
-        expect(fs.readFileSync).toBeCalledWith(cacheFilePath, 'utf-8');
+        expect(fs.readFileSync).toBeCalledWith(cacheFilePath, 'utf8');
 
         expect(data.clocks).toEqual(mockClocks);
         expect(data.files).toEqual(initialData.files);
@@ -378,7 +378,7 @@ describe('HasteMap', () => {
       fs.readFileSync.mockClear();
 
       // Let's assume one JS file has changed.
-      changedFiles = object({
+      mockChangedFiles = object({
         '/fruits/banana.js': [
           '/**',
           ' * @providesModule Kiwi', // Identity crisis.
@@ -396,8 +396,8 @@ describe('HasteMap', () => {
       return new HasteMap(defaultConfig).build().then(data => {
         expect(fs.readFileSync.mock.calls.length).toBe(2);
 
-        expect(fs.readFileSync).toBeCalledWith(cacheFilePath, 'utf-8');
-        expect(fs.readFileSync).toBeCalledWith('/fruits/banana.js', 'utf-8');
+        expect(fs.readFileSync).toBeCalledWith(cacheFilePath, 'utf8');
+        expect(fs.readFileSync).toBeCalledWith('/fruits/banana.js', 'utf8');
 
         expect(data.clocks).toEqual(mockClocks);
 
@@ -421,7 +421,7 @@ describe('HasteMap', () => {
 
       // Let's assume one JS file was removed.
       delete mockFs['/fruits/banana.js'];
-      changedFiles = object({
+      mockChangedFiles = object({
         '/fruits/banana.js': null,
       });
 
diff --git a/packages/jest-haste-map/src/__tests__/worker-test.js b/packages/jest-haste-map/src/__tests__/worker-test.js
index 740f546f8af1..13e1b1838582 100644
--- a/packages/jest-haste-map/src/__tests__/worker-test.js
+++ b/packages/jest-haste-map/src/__tests__/worker-test.js
@@ -58,7 +58,7 @@ describe('worker', () => {
     fs = require('graceful-fs');
     readFileSync = fs.readFileSync;
     fs.readFileSync = jest.fn((path, options) => {
-      expect(options).toBe('utf-8');
+      expect(options).toBe('utf8');
 
       if (mockFs[path]) {
         return mockFs[path];
diff --git a/packages/jest-haste-map/src/index.js b/packages/jest-haste-map/src/index.js
index 5357fc55c28e..36c3c46b3bfb 100644
--- a/packages/jest-haste-map/src/index.js
+++ b/packages/jest-haste-map/src/index.js
@@ -265,7 +265,7 @@ class HasteMap {
    * 1. read data from the cache or create an empty structure.
    */
   read(): HasteMapObject {
-    return this._parse(fs.readFileSync(this._cachePath, 'utf-8'));
+    return this._parse(fs.readFileSync(this._cachePath, 'utf8'));
   }
 
   /**
@@ -368,7 +368,7 @@ class HasteMap {
    * 4. serialize the new `HasteMap` in a cache file.
    */
   _persist(hasteMap: HasteMapObject): HasteMapObject {
-    fs.writeFileSync(this._cachePath, JSON.stringify(hasteMap), 'utf-8');
+    fs.writeFileSync(this._cachePath, JSON.stringify(hasteMap), 'utf8');
     return hasteMap;
   }
 
diff --git a/packages/jest-haste-map/src/worker.js b/packages/jest-haste-map/src/worker.js
index 7f2b7a2801e7..84afbdb1db0f 100644
--- a/packages/jest-haste-map/src/worker.js
+++ b/packages/jest-haste-map/src/worker.js
@@ -44,7 +44,7 @@ const formatError = (error: string|Error): Error => {
 module.exports = (data: WorkerMessage, callback: WorkerCallback): void => {
   try {
     const filePath = data.filePath;
-    const content = fs.readFileSync(filePath, 'utf-8');
+    const content = fs.readFileSync(filePath, 'utf8');
     let module;
     let id;
     let dependencies;
diff --git a/packages/jest-jasmine1/.npmignore b/packages/jest-jasmine1/.npmignore
index e31125afcece..85e48fe7b0a4 100644
--- a/packages/jest-jasmine1/.npmignore
+++ b/packages/jest-jasmine1/.npmignore
@@ -1,3 +1,3 @@
-__tests__
-__mocks__
+**/__mocks__/**
+**/__tests__/**
 src
diff --git a/packages/jest-jasmine1/package.json b/packages/jest-jasmine1/package.json
index fe029a740747..5bf47b973ba6 100644
--- a/packages/jest-jasmine1/package.json
+++ b/packages/jest-jasmine1/package.json
@@ -12,7 +12,8 @@
     "jest-util": "^13.2.2"
   },
   "jest": {
-    "rootDir": "./build",
+    "rootDir": "./src",
+    "scriptPreprocessor": "../../babel-jest",
     "testEnvironment": "node"
   },
   "scripts": {
diff --git a/packages/jest-jasmine1/src/index.js b/packages/jest-jasmine1/src/index.js
index 6a1c5e9567bf..4d6fbb24083d 100644
--- a/packages/jest-jasmine1/src/index.js
+++ b/packages/jest-jasmine1/src/index.js
@@ -7,15 +7,27 @@
  */
 'use strict';
 
+const JasmineReporter = require('./reporter');
+
 const fs = require('graceful-fs');
 const jasminePit = require('./jasmine-pit');
-const JasmineReporter = require('./reporter');
+const vm = require('vm');
 
 const JASMINE_PATH = require.resolve('../vendor/jasmine-1.3.0');
 const JASMINE_ONLY_PATH = require.resolve('./jasmine-only.js');
 
-const jasmineFileContent = fs.readFileSync(JASMINE_PATH, 'utf8');
-const jasmineOnlyContent = fs.readFileSync(JASMINE_ONLY_PATH, 'utf8');
+const jasmineScript = new vm.Script(fs.readFileSync(JASMINE_PATH, 'utf8'), {
+  displayErrors: true,
+  filename: JASMINE_PATH,
+});
+
+const jasmineOnlyScript = new vm.Script(
+  fs.readFileSync(JASMINE_ONLY_PATH, 'utf8'),
+  {
+    displayErrors: true,
+    filename: JASMINE_ONLY_PATH,
+  },
+);
 
 function isSpyLike(test) {
   return test.calls !== undefined;
@@ -100,9 +112,9 @@ function jasmine1(config, environment, moduleLoader, testPath) {
   // To account for this conflict, we set up jasmine in an environment with real
   // timers (instead of mock timers).
   environment.fakeTimers.runWithRealTimers(() => {
-    environment.runSourceText(jasmineFileContent, JASMINE_PATH);
+    environment.runScript(jasmineScript);
     jasminePit.install(environment.global);
-    environment.runSourceText(jasmineOnlyContent);
+    environment.runScript(jasmineOnlyScript);
 
     const _comparedObjects = new WeakMap();
     environment.global.jasmine.Env.prototype.compareObjects_ =
diff --git a/packages/jest-jasmine2/.npmignore b/packages/jest-jasmine2/.npmignore
index e31125afcece..85e48fe7b0a4 100644
--- a/packages/jest-jasmine2/.npmignore
+++ b/packages/jest-jasmine2/.npmignore
@@ -1,3 +1,3 @@
-__tests__
-__mocks__
+**/__mocks__/**
+**/__tests__/**
 src
diff --git a/packages/jest-jasmine2/package.json b/packages/jest-jasmine2/package.json
index ba4eeb313a44..18cdcf6813e0 100644
--- a/packages/jest-jasmine2/package.json
+++ b/packages/jest-jasmine2/package.json
@@ -14,7 +14,8 @@
     "jest-util": "^13.2.2"
   },
   "jest": {
-    "rootDir": "./build",
+    "rootDir": "./src",
+    "scriptPreprocessor": "../../babel-jest",
     "testEnvironment": "node"
   },
   "scripts": {
diff --git a/packages/jest-jasmine2/src/index.js b/packages/jest-jasmine2/src/index.js
index 5318b96aeb86..d5b2b9e949d4 100644
--- a/packages/jest-jasmine2/src/index.js
+++ b/packages/jest-jasmine2/src/index.js
@@ -14,17 +14,22 @@ import type {Environment} from 'types/Environment';
 import type {TestResult} from 'types/TestResult';
 import type Runtime from '../../jest-runtime/src';
 
+const JasmineReporter = require('./reporter');
+
 const fs = require('graceful-fs');
 const jasminePit = require('./jasmine-pit');
 const snapshot = require('jest-snapshot');
-const JasmineReporter = require('./reporter');
+const vm = require('vm');
 
 const CALL_PRINT_LIMIT = 3;
 const LAST_CALL_PRINT_LIMIT = 1;
 const JASMINE_PATH = require.resolve('../vendor/jasmine-2.4.1.js');
 const JASMINE_CHECK_PATH = require.resolve('./jasmine-check');
-const jasmineFileContent =
-  fs.readFileSync(require.resolve(JASMINE_PATH), 'utf8');
+
+const jasmineScript = new vm.Script(fs.readFileSync(JASMINE_PATH, 'utf8'), {
+  displayErrors: true,
+  filename: JASMINE_PATH,
+});
 
 function isSpyLike(test) {
   return test.calls && test.calls.all !== undefined;
@@ -62,7 +67,7 @@ function jasmine2(
   // To account for this conflict, we set up jasmine in an environment with real
   // timers (instead of mock timers).
   environment.fakeTimers.runWithRealTimers(() => {
-    environment.runSourceText(jasmineFileContent, JASMINE_PATH);
+    environment.runScript(jasmineScript);
 
     const requireJasmine = environment.global.jasmineRequire;
     jasmine = requireJasmine.core(requireJasmine);
diff --git a/packages/jest-mock/.npmignore b/packages/jest-mock/.npmignore
index e31125afcece..85e48fe7b0a4 100644
--- a/packages/jest-mock/.npmignore
+++ b/packages/jest-mock/.npmignore
@@ -1,3 +1,3 @@
-__tests__
-__mocks__
+**/__mocks__/**
+**/__tests__/**
 src
diff --git a/packages/jest-mock/package.json b/packages/jest-mock/package.json
index d54381051133..534effb33808 100644
--- a/packages/jest-mock/package.json
+++ b/packages/jest-mock/package.json
@@ -8,7 +8,8 @@
   "license": "BSD-3-Clause",
   "main": "build/index.js",
   "jest": {
-    "rootDir": "./build",
+    "rootDir": "./src",
+    "scriptPreprocessor": "../../babel-jest",
     "testEnvironment": "node"
   },
   "scripts": {
diff --git a/packages/jest-repl/.npmignore b/packages/jest-repl/.npmignore
index 47a78158e488..85e48fe7b0a4 100644
--- a/packages/jest-repl/.npmignore
+++ b/packages/jest-repl/.npmignore
@@ -1,3 +1,3 @@
-__mocks__/
-__tests__/
+**/__mocks__/**
+**/__tests__/**
 src
diff --git a/packages/jest-repl/package.json b/packages/jest-repl/package.json
index 17a3b518cb5a..a4648af94ec8 100644
--- a/packages/jest-repl/package.json
+++ b/packages/jest-repl/package.json
@@ -18,11 +18,9 @@
   },
   "jest": {
     "automock": false,
-    "rootDir": "./build",
-    "testEnvironment": "jest-environment-node",
-    "testPathIgnorePatterns": [
-      "/__tests__/[^/]*/.+"
-    ]
+    "rootDir": "./src",
+    "scriptPreprocessor": "../../babel-jest",
+    "testEnvironment": "node"
   },
   "scripts": {
     "test": "../../packages/jest-cli/bin/jest.js"
diff --git a/packages/jest-resolve/.npmignore b/packages/jest-resolve/.npmignore
index e31125afcece..85e48fe7b0a4 100644
--- a/packages/jest-resolve/.npmignore
+++ b/packages/jest-resolve/.npmignore
@@ -1,3 +1,3 @@
-__tests__
-__mocks__
+**/__mocks__/**
+**/__tests__/**
 src
diff --git a/packages/jest-resolve/package.json b/packages/jest-resolve/package.json
index a2f284d813be..36c744abd470 100644
--- a/packages/jest-resolve/package.json
+++ b/packages/jest-resolve/package.json
@@ -13,7 +13,8 @@
     "resolve": "^1.1.6"
   },
   "jest": {
-    "rootDir": "./build",
+    "rootDir": "./src",
+    "scriptPreprocessor": "../../babel-jest",
     "testEnvironment": "node"
   },
   "scripts": {
diff --git a/packages/jest-runtime/.npmignore b/packages/jest-runtime/.npmignore
index 47a78158e488..85e48fe7b0a4 100644
--- a/packages/jest-runtime/.npmignore
+++ b/packages/jest-runtime/.npmignore
@@ -1,3 +1,3 @@
-__mocks__/
-__tests__/
+**/__mocks__/**
+**/__tests__/**
 src
diff --git a/packages/jest-runtime/package.json b/packages/jest-runtime/package.json
index 6ff1ea8d117f..a57cb136ee95 100644
--- a/packages/jest-runtime/package.json
+++ b/packages/jest-runtime/package.json
@@ -10,7 +10,6 @@
   "dependencies": {
     "graceful-fs": "^4.1.3",
     "jest-config": "^13.2.3",
-    "jest-environment-jsdom": "^13.2.2",
     "jest-haste-map": "^13.2.2",
     "jest-mock": "^13.2.2",
     "jest-resolve": "^13.2.2",
@@ -23,11 +22,14 @@
     "jest-runtime": "./bin/jest-runtime.js"
   },
   "devDependencies": {
-    "jest-config": "^13.2.3"
+    "jest-config": "^13.2.3",
+    "jest-environment-node": "^13.2.2"
   },
   "jest": {
     "automock": false,
-    "rootDir": "./build",
+    "rootDir": "./src",
+    "scriptPreprocessor": "../../babel-jest",
+    "setupTestFrameworkScriptFile": "<rootDir>/__mocks__/env.js",
     "testEnvironment": "jest-environment-node",
     "testPathIgnorePatterns": [
       "/__tests__/[^/]*/.+"
diff --git a/packages/jest-runtime/src/__mocks__/createRuntime.js b/packages/jest-runtime/src/__mocks__/createRuntime.js
index efdb26137aae..47afec42f2c2 100644
--- a/packages/jest-runtime/src/__mocks__/createRuntime.js
+++ b/packages/jest-runtime/src/__mocks__/createRuntime.js
@@ -9,7 +9,7 @@
 const path = require('path');
 
 module.exports = function createRuntime(filename, config) {
-  const JSDOMEnvironment = require('jest-environment-jsdom');
+  const NodeEnvironment = require('jest-environment-node');
   const Runtime = require('../');
 
   const createHasteMap = require('jest-haste-map').create;
@@ -21,7 +21,7 @@ module.exports = function createRuntime(filename, config) {
     rootDir: path.resolve(path.dirname(filename), 'test_root'),
   }, config));
 
-  const environment = new JSDOMEnvironment(config);
+  const environment = new NodeEnvironment(config);
   return createHasteMap(config, {resetCache: false, maxWorkers: 1})
     .build()
     .then(moduleMap => {
diff --git a/packages/jest-runtime/src/__mocks__/env.js b/packages/jest-runtime/src/__mocks__/env.js
new file mode 100644
index 000000000000..4d6c4ae94253
--- /dev/null
+++ b/packages/jest-runtime/src/__mocks__/env.js
@@ -0,0 +1,10 @@
+/**
+ * Copyright (c) 2014-present, Facebook, Inc. All rights reserved.
+ *
+ * This source code is licensed under the BSD-style license found in the
+ * LICENSE file in the root directory of this source tree. An additional grant
+ * of patent rights can be found in the PATENTS file in the same directory.
+ */
+'use strict';
+
+jasmine.DEFAULT_TIMEOUT_INTERVAL = 15000;
diff --git a/packages/jest-runtime/src/__mocks__/jest-environment-jsdom.js b/packages/jest-runtime/src/__mocks__/jest-environment-jsdom.js
deleted file mode 100644
index 7cf8b67e2632..000000000000
--- a/packages/jest-runtime/src/__mocks__/jest-environment-jsdom.js
+++ /dev/null
@@ -1,36 +0,0 @@
-/**
- * Copyright (c) 2014-present, Facebook, Inc. All rights reserved.
- *
- * This source code is licensed under the BSD-style license found in the
- * LICENSE file in the root directory of this source tree. An additional grant
- * of patent rights can be found in the PATENTS file in the same directory.
- */
-'use strict';
-
-const vm = require.requireActual('vm');
-
-const JSDOMEnvironment = jest.genMockFromModule('jest-environment-jsdom');
-
-JSDOMEnvironment.mockImplementation(function(config) {
-  this.global = {
-    console: {},
-    mockClearTimers: jest.genMockFn(),
-    JSON,
-  };
-
-  const globalValues = Object.assign({}, config.globals);
-  for (const customGlobalKey in globalValues) {
-    this.global[customGlobalKey] = globalValues[customGlobalKey];
-  }
-});
-
-JSDOMEnvironment.prototype.runSourceText.mockImplementation(
-  function(sourceText, filename) {
-    return vm.runInNewContext(sourceText, this.global, {
-      filename,
-      displayErrors: false,
-    });
-  },
-);
-
-module.exports = JSDOMEnvironment;
diff --git a/packages/jest-runtime/src/__tests__/Resolve-browser-test.js b/packages/jest-runtime/src/__tests__/Resolve-browser-test.js
index 6e0c9d1ba684..04bba0275fbb 100644
--- a/packages/jest-runtime/src/__tests__/Resolve-browser-test.js
+++ b/packages/jest-runtime/src/__tests__/Resolve-browser-test.js
@@ -9,12 +9,6 @@
  */
 'use strict';
 
-jest.disableAutomock();
-jest.mock(
-  'jest-environment-jsdom',
-  () => require('../__mocks__/jest-environment-jsdom'),
-);
-
 let createRuntime;
 
 describe('resolve', () => {
diff --git a/packages/jest-runtime/src/__tests__/Runtime-NODE_PATH-test.js b/packages/jest-runtime/src/__tests__/Runtime-NODE_PATH-test.js
index 448dcd4e649d..7b7b4031a8c5 100644
--- a/packages/jest-runtime/src/__tests__/Runtime-NODE_PATH-test.js
+++ b/packages/jest-runtime/src/__tests__/Runtime-NODE_PATH-test.js
@@ -9,12 +9,6 @@
  */
 'use strict';
 
-jest.disableAutomock();
-jest.mock(
-  'jest-environment-jsdom',
-  () => require('../__mocks__/jest-environment-jsdom'),
-);
-
 const path = require('path');
 
 const cwd = process.cwd();
diff --git a/packages/jest-runtime/src/__tests__/Runtime-cli-test.js b/packages/jest-runtime/src/__tests__/Runtime-cli-test.js
index 6db9df9eea90..b2c8e3678673 100644
--- a/packages/jest-runtime/src/__tests__/Runtime-cli-test.js
+++ b/packages/jest-runtime/src/__tests__/Runtime-cli-test.js
@@ -14,8 +14,6 @@ const path = require('path');
 
 const JEST_RUNTIME = path.resolve(__dirname, '../../bin/jest-runtime.js');
 
-jest.disableAutomock();
-
 describe('Runtime', () => {
   describe('cli', () => {
     it('fails with no path', () => {
diff --git a/packages/jest-runtime/src/__tests__/Runtime-currentTestPath-test.js b/packages/jest-runtime/src/__tests__/Runtime-currentTestPath-test.js
index efb6411d3660..b3a51f05eee7 100644
--- a/packages/jest-runtime/src/__tests__/Runtime-currentTestPath-test.js
+++ b/packages/jest-runtime/src/__tests__/Runtime-currentTestPath-test.js
@@ -9,8 +9,6 @@
  */
 'use strict';
 
-jest.disableAutomock();
-
 describe('Runtime', () => {
   describe('currentTestPath', () => {
     it('makes the current test path available', () => {
diff --git a/packages/jest-runtime/src/__tests__/Runtime-jsdom-env-test.js b/packages/jest-runtime/src/__tests__/Runtime-env-error-test.js
similarity index 96%
rename from packages/jest-runtime/src/__tests__/Runtime-jsdom-env-test.js
rename to packages/jest-runtime/src/__tests__/Runtime-env-error-test.js
index efab916d496d..26c998b22e00 100644
--- a/packages/jest-runtime/src/__tests__/Runtime-jsdom-env-test.js
+++ b/packages/jest-runtime/src/__tests__/Runtime-env-error-test.js
@@ -9,10 +9,6 @@
  */
 'use strict';
 
-jest.disableAutomock();
-
-jasmine.DEFAULT_TIMEOUT_INTERVAL = 15000;
-
 let createRuntime;
 
 describe('Runtime', () => {
diff --git a/packages/jest-runtime/src/__tests__/Runtime-genMockFromModule-test.js b/packages/jest-runtime/src/__tests__/Runtime-genMockFromModule-test.js
index 91260ff0e252..5bd7e9f5ddbf 100644
--- a/packages/jest-runtime/src/__tests__/Runtime-genMockFromModule-test.js
+++ b/packages/jest-runtime/src/__tests__/Runtime-genMockFromModule-test.js
@@ -9,12 +9,6 @@
  */
 'use strict';
 
-jest.disableAutomock();
-jest.mock(
-  'jest-environment-jsdom',
-  () => require('../__mocks__/jest-environment-jsdom'),
-);
-
 let createRuntime;
 
 describe('Runtime', () => {
diff --git a/packages/jest-runtime/src/__tests__/Runtime-getTestEnvData-test.js b/packages/jest-runtime/src/__tests__/Runtime-getTestEnvData-test.js
index 5d26b9317c58..cee91885a5be 100644
--- a/packages/jest-runtime/src/__tests__/Runtime-getTestEnvData-test.js
+++ b/packages/jest-runtime/src/__tests__/Runtime-getTestEnvData-test.js
@@ -9,12 +9,6 @@
  */
 'use strict';
 
-jest.disableAutomock();
-jest.mock(
-  'jest-environment-jsdom',
-  () => require('../__mocks__/jest-environment-jsdom'),
-);
-
 const config = {
   testEnvData: {
     someTestData: 42,
diff --git a/packages/jest-runtime/src/__tests__/Runtime-jest-fn.js b/packages/jest-runtime/src/__tests__/Runtime-jest-fn.js
index f62fd37ccce2..38807b9706d5 100644
--- a/packages/jest-runtime/src/__tests__/Runtime-jest-fn.js
+++ b/packages/jest-runtime/src/__tests__/Runtime-jest-fn.js
@@ -9,12 +9,6 @@
  */
 'use strict';
 
-jest.disableAutomock();
-jest.mock(
-  'jest-environment-jsdom',
-  () => require('../__mocks__/jest-environment-jsdom'),
-);
-
 let createRuntime;
 
 describe('Runtime', () => {
diff --git a/packages/jest-runtime/src/__tests__/Runtime-mock-test.js b/packages/jest-runtime/src/__tests__/Runtime-mock-test.js
index 30cb710f8e67..ffd54a819252 100644
--- a/packages/jest-runtime/src/__tests__/Runtime-mock-test.js
+++ b/packages/jest-runtime/src/__tests__/Runtime-mock-test.js
@@ -9,12 +9,6 @@
  */
 'use strict';
 
-jest.disableAutomock();
-jest.mock(
-  'jest-environment-jsdom',
-  () => require('../__mocks__/jest-environment-jsdom'),
-);
-
 let createRuntime;
 
 describe('Runtime', () => {
diff --git a/packages/jest-runtime/src/__tests__/Runtime-moduleDirectories-test.js b/packages/jest-runtime/src/__tests__/Runtime-moduleDirectories-test.js
index 6eab7d286a9a..567a9082c4c2 100644
--- a/packages/jest-runtime/src/__tests__/Runtime-moduleDirectories-test.js
+++ b/packages/jest-runtime/src/__tests__/Runtime-moduleDirectories-test.js
@@ -9,12 +9,6 @@
  */
 'use strict';
 
-jest.disableAutomock();
-jest.mock(
-  'jest-environment-jsdom',
-  () => require('../__mocks__/jest-environment-jsdom'),
-);
-
 const path = require('path');
 
 const moduleDirectories = ['module_dir'];
diff --git a/packages/jest-runtime/src/__tests__/Runtime-requireMock-test.js b/packages/jest-runtime/src/__tests__/Runtime-requireMock-test.js
index f9cb59100a0d..04a109dcc089 100644
--- a/packages/jest-runtime/src/__tests__/Runtime-requireMock-test.js
+++ b/packages/jest-runtime/src/__tests__/Runtime-requireMock-test.js
@@ -9,12 +9,6 @@
  */
 'use strict';
 
-jest.disableAutomock();
-jest.mock(
-  'jest-environment-jsdom',
-  () => require('../__mocks__/jest-environment-jsdom'),
-);
-
 let createRuntime;
 
 describe('Runtime', () => {
diff --git a/packages/jest-runtime/src/__tests__/Runtime-requireModule-test.js b/packages/jest-runtime/src/__tests__/Runtime-requireModule-test.js
index d8f7a9b90d35..0c71be84acd8 100644
--- a/packages/jest-runtime/src/__tests__/Runtime-requireModule-test.js
+++ b/packages/jest-runtime/src/__tests__/Runtime-requireModule-test.js
@@ -9,12 +9,6 @@
  */
 'use strict';
 
-jest.disableAutomock();
-jest.mock(
-  'jest-environment-jsdom',
-  () => require('../__mocks__/jest-environment-jsdom'),
-);
-
 const path = require('path');
 
 let createRuntime;
diff --git a/packages/jest-runtime/src/__tests__/Runtime-requireModuleOrMock-test.js b/packages/jest-runtime/src/__tests__/Runtime-requireModuleOrMock-test.js
index 97c59e1fb7a8..33a2ede9c1b0 100644
--- a/packages/jest-runtime/src/__tests__/Runtime-requireModuleOrMock-test.js
+++ b/packages/jest-runtime/src/__tests__/Runtime-requireModuleOrMock-test.js
@@ -9,12 +9,6 @@
  */
 'use strict';
 
-jest.disableAutomock();
-jest.mock(
-  'jest-environment-jsdom',
-  () => require('../__mocks__/jest-environment-jsdom'),
-);
-
 let createRuntime;
 
 describe('Runtime', () => {
diff --git a/packages/jest-runtime/src/__tests__/__snapshots__/transform-test.js.snap b/packages/jest-runtime/src/__tests__/__snapshots__/transform-test.js.snap
new file mode 100644
index 000000000000..b5d5b862c7e2
--- /dev/null
+++ b/packages/jest-runtime/src/__tests__/__snapshots__/transform-test.js.snap
@@ -0,0 +1,29 @@
+exports[`transform transforms a file properly 0`] = `
+"({"Object.<anonymous>":function(module,exports,require,__dirname,__filename,global,jest,$JEST){module.exports = "banana";
+}});"
+`;
+
+exports[`transform transforms a file properly 1`] = `
+"({"Object.<anonymous>":function(module,exports,require,__dirname,__filename,global,jest,$JEST){instrumented kiwi
+}});"
+`;
+
+exports[`transform uses the supplied preprocessor 0`] = `
+"({\"Object.<anonymous>\":function(module,exports,require,__dirname,__filename,global,jest,$JEST){
+Script: module.exports = \"banana\";
+Path: /fruits/banana.js
+Config: {
+  \"cache\": true,
+  \"cacheDirectory\": \"/cache/\",
+  \"preprocessorIgnorePatterns\": [
+    \"/node_modules/\"
+  ],
+  \"scriptPreprocessor\": \"test-preprocessor\"
+}
+}});"
+`;
+
+exports[`transform uses the supplied preprocessor 1`] = `
+"({"Object.<anonymous>":function(module,exports,require,__dirname,__filename,global,jest,$JEST){module.exports = "react"
+}});"
+`;
diff --git a/packages/jest-runtime/src/__tests__/test_root/haste-modules/FooRenderUtil.js b/packages/jest-runtime/src/__tests__/test_root/haste-modules/FooRenderUtil.js
index b27fcc46ee92..4ebabc194de8 100644
--- a/packages/jest-runtime/src/__tests__/test_root/haste-modules/FooRenderUtil.js
+++ b/packages/jest-runtime/src/__tests__/test_root/haste-modules/FooRenderUtil.js
@@ -11,11 +11,11 @@
 'use strict';
 
 module.exports = {
-  getHeaderHeight(): number {
+  getHeaderHeight() {
     return 5;
   },
 
-  getBodyHeight(): number {
+  getBodyHeight() {
     return 5;
   },
 };
diff --git a/packages/jest-runtime/src/__tests__/transform-test.js b/packages/jest-runtime/src/__tests__/transform-test.js
new file mode 100644
index 000000000000..d48125fb3d3b
--- /dev/null
+++ b/packages/jest-runtime/src/__tests__/transform-test.js
@@ -0,0 +1,164 @@
+/**
+ * Copyright (c) 2014-present, Facebook, Inc. All rights reserved.
+ *
+ * This source code is licensed under the BSD-style license found in the
+ * LICENSE file in the root directory of this source tree. An additional grant
+ * of patent rights can be found in the PATENTS file in the same directory.
+ *
+ * @emails oncall+jsinfra
+ */
+'use strict';
+
+jest
+  .mock('graceful-fs')
+  .mock('jest-resolve')
+  .mock('jest-util')
+  .mock('vm');
+
+jest.mock(
+  'test-preprocessor',
+  () => {
+    const stableStringify = require('json-stable-stringify');
+    return {
+      getCacheKey: jest.fn((content, filename, configStr) => 'ab'),
+      process: (content, filename, config) => {
+        return (
+          `\nScript: ${content}\n` +
+          `Path: ${filename}\n` +
+          `Config: ${stableStringify(config, {space: 2})}`
+        );
+      },
+    };
+  },
+  {virtual: true},
+);
+
+const getCachePath = (fs, config) => {
+  for (const path in mockFs) {
+    if (path.startsWith(config.cacheDirectory)) {
+      return path;
+    }
+  }
+  return null;
+};
+
+let config;
+let fs;
+let mockFs;
+let object;
+let transform;
+let vm;
+
+describe('transform', () => {
+
+  const reset = () => {
+    object = data => Object.assign(Object.create(null), data);
+
+    vm = require('vm');
+
+    mockFs = object({
+      '/fruits/banana.js': [
+        'module.exports = "banana";',
+      ].join('\n'),
+      '/fruits/kiwi.js': [
+        'module.exports = () => "kiwi"',
+      ].join('\n'),
+      '/node_modules/react.js': [
+        'module.exports = "react"',
+      ].join('\n'),
+    });
+
+    fs = require('graceful-fs');
+    fs.readFileSync = jest.fn((path, options) => {
+      expect(options).toBe('utf8');
+
+      if (mockFs[path]) {
+        return mockFs[path];
+      }
+
+      throw new Error(`Cannot read path '${path}'.`);
+    });
+    fs.writeFileSync = jest.fn((path, data, options) => {
+      expect(options).toBe('utf8');
+      mockFs[path] = data;
+    });
+
+    fs.unlinkSync = jest.fn();
+    fs.statSync = jest.fn(path => ({
+      isFile: () => !!mockFs[path],
+      mtime: {getTime: () => 42},
+    }));
+
+    require('jest-resolve').fileExists = jest.fn(path => !!mockFs[path]);
+
+    config = {
+      cache: true,
+      cacheDirectory: '/cache/',
+      preprocessorIgnorePatterns: ['/node_modules/'],
+    };
+
+    transform = require('../transform');
+  };
+
+  beforeEach(reset);
+
+  it('transforms a file properly', () => {
+    const response = transform('/fruits/banana.js', config);
+
+    expect(response instanceof vm.Script);
+    expect(vm.Script.mock.calls[0][0]).toMatchSnapshot();
+
+    // no-cache case
+    expect(fs.readFileSync.mock.calls.length).toBe(1);
+    expect(fs.readFileSync).toBeCalledWith('/fruits/banana.js', 'utf8');
+
+    // in-memory cache
+    const response2 = transform('/fruits/banana.js', config);
+    expect(response2).toBe(response);
+
+    transform('/fruits/kiwi.js', config, {
+      instrument: () => 'instrumented kiwi',
+    });
+    expect(vm.Script.mock.calls[1][0]).toMatchSnapshot();
+  });
+
+  it('uses the supplied preprocessor', () => {
+    config = Object.assign(config, {
+      scriptPreprocessor: 'test-preprocessor',
+    });
+
+    transform('/fruits/banana.js', config);
+
+    expect(require('test-preprocessor').getCacheKey).toBeCalled();
+
+    expect(vm.Script.mock.calls[0][0]).toMatchSnapshot();
+
+    transform('/node_modules/react.js', config);
+    expect(vm.Script.mock.calls[1][0]).toMatchSnapshot();
+  });
+
+  it('reads values from the cache', () => {
+    const transformConfig = Object.assign(config, {
+      scriptPreprocessor: 'test-preprocessor',
+    });
+    transform('/fruits/banana.js', transformConfig);
+
+    const cachePath = getCachePath(mockFs, config);
+    expect(fs.writeFileSync).toBeCalled();
+    expect(fs.writeFileSync.mock.calls[0][0]).toBe(cachePath);
+
+    // Cache the state in `mockFsCopy`
+    const mockFsCopy = mockFs;
+    jest.resetModuleRegistry();
+    reset();
+
+    // Restore the cached fs
+    mockFs = mockFsCopy;
+    transform('/fruits/banana.js', transformConfig);
+
+    expect(fs.readFileSync.mock.calls.length).toBe(2);
+    expect(fs.readFileSync).toBeCalledWith('/fruits/banana.js', 'utf8');
+    expect(fs.readFileSync).toBeCalledWith(cachePath, 'utf8');
+    expect(fs.writeFileSync).not.toBeCalled();
+  });
+});
diff --git a/packages/jest-runtime/src/index.js b/packages/jest-runtime/src/index.js
index c273e86b64fc..00c39034812c 100644
--- a/packages/jest-runtime/src/index.js
+++ b/packages/jest-runtime/src/index.js
@@ -14,13 +14,14 @@ import type {Config, Path} from 'types/Config';
 import type {Environment} from 'types/Environment';
 import type {HasteResolverContext} from 'types/Runtime';
 import type Resolver from '../../jest-resolve/src';
+import type {Script} from 'vm';
 
 const createHasteMap = require('jest-haste-map').create;
 const createResolver = require('jest-resolve').create;
 const fs = require('graceful-fs');
 const moduleMocker = require('jest-mock');
 const path = require('path');
-const transform = require('./lib/transform');
+const transform = require('./transform');
 const utils = require('jest-util');
 
 type Module = {
@@ -327,38 +328,34 @@ class Runtime {
     return to ? this._resolver.resolveModule(from, to) : from;
   }
 
-  _execModule(localModule: Module) {
-    // If the environment was disposed, prevent this module from
-    // being executed.
-    if (!this._environment.global) {
-      return;
-    }
-
-    const filename = localModule.filename;
-    const collectors = this._coverageCollectors;
+  _shouldCollectCoverage(filename: Path) {
     const collectOnlyFrom = this._config.collectCoverageOnlyFrom;
     const shouldCollectCoverage = (
       (this._config.collectCoverage && !collectOnlyFrom) ||
       (collectOnlyFrom && collectOnlyFrom[filename])
     );
-    let moduleContent = transform(filename, this._config);
-    let collectorStore;
-    if (
+    return (
       shouldCollectCoverage &&
       !this._coverageRegex.test(filename) &&
       !(this._mocksPattern && this._mocksPattern.test(filename)) &&
       !this._testRegex.test(filename)
-    ) {
-      if (!collectors[filename]) {
-        collectors[filename] = new this._CoverageCollector(
-          moduleContent,
-          filename,
-        );
-      }
-      const collector = collectors[filename];
-      collectorStore = collector.getCoverageDataStore();
-      moduleContent = collector.getInstrumentedSource('$JEST_COVERAGE_DATA');
+    );
+  }
+
+  _execModule(localModule: Module) {
+    // If the environment was disposed, prevent this module from being executed.
+    if (!this._environment.global) {
+      return;
+    }
+
+    const filename = localModule.filename;
+    const shouldCollectCoverage = this._shouldCollectCoverage(filename);
+    const collectors = this._coverageCollectors;
+    if (shouldCollectCoverage && !collectors[filename]) {
+      collectors[filename] = new this._CoverageCollector();
     }
+    const collectorStore =
+      shouldCollectCoverage && collectors[filename].getCoverageDataStore();
 
     const lastExecutingModulePath = this._currentlyExecutingModulePath;
     this._currentlyExecutingModulePath = filename;
@@ -371,8 +368,17 @@ class Runtime {
     localModule.paths = this._resolver.getModulePaths(dirname);
     localModule.require = this._createRequireImplementation(filename);
 
-    const wrapperFunc = this._runSourceText(moduleContent, filename);
-    wrapperFunc.call(
+    const script = transform(filename, this._config, {
+      instrument: shouldCollectCoverage && (
+        source => collectors[filename].getInstrumentedSource(
+          source,
+          filename,
+          '$JEST',
+        )
+      ),
+    });
+    const wrapper = this._runScript(script, filename);
+    wrapper.call(
       localModule.exports, // module context
       localModule, // module object
       localModule.exports, // module exports
@@ -388,16 +394,14 @@ class Runtime {
     this._currentlyExecutingModulePath = lastExecutingModulePath;
   }
 
-  _runSourceText(moduleContent: string, filename: string) {
-    /* eslint-disable max-len */
-    const config = this._config;
-    const relative = filePath => path.relative(config.rootDir, filePath);
-    const env = this._environment;
-    const evalResultVariable = 'Object.<anonymous>';
-    const wrapper = '({ "' + evalResultVariable + '": function(module, exports, require, __dirname, __filename, global, jest, $JEST_COVERAGE_DATA) {' + moduleContent + '\n}});';
+  _runScript(script: Script, filename: string) {
     try {
-      return env.runSourceText(wrapper, filename)[evalResultVariable];
+      return this._environment.runScript(script)[
+        transform.EVAL_RESULT_VARIABLE
+      ];
     } catch (e) {
+      const config = this._config;
+      const relative = filePath => path.relative(config.rootDir, filePath);
       if (e.constructor.name === 'SyntaxError') {
         const hasPreprocessor = config.scriptPreprocessor;
         const preprocessorInfo = hasPreprocessor
@@ -407,18 +411,18 @@ class Runtime {
           ? `Make sure your '.babelrc' is set up correctly, ` +
             `for example it should include the 'es2015' preset.\n`
           : '';
+        /* eslint-disable max-len */
         throw new SyntaxError(
           `${e.message} in file '${relative(filename)}'.\n\n` +
           `Make sure your preprocessor is set up correctly and ensure ` +
           `your 'preprocessorIgnorePatterns' configuration is correct: http://facebook.github.io/jest/docs/api.html#preprocessorignorepatterns-array-string\n` +
           'If you are currently setting up Jest or modifying your preprocessor, try `jest --no-cache`.\n' +
-          `Preprocessor: ${preprocessorInfo}.\n${babelInfo}` +
-          `Jest tried to the execute the following ${hasPreprocessor ? 'preprocessed ' : ''}code:\n${moduleContent}\n`,
+          `Preprocessor: ${preprocessorInfo}.\n${babelInfo}`,
         );
+        /* eslint-enable max-len */
       }
       throw e;
     }
-    /* eslint-enable max-len */
   }
 
   _generateMock(from: Path, moduleName: string) {
diff --git a/packages/jest-runtime/src/lib/transform.js b/packages/jest-runtime/src/transform.js
similarity index 50%
rename from packages/jest-runtime/src/lib/transform.js
rename to packages/jest-runtime/src/transform.js
index 9f8e761aca2b..d2fb1dbe6dca 100644
--- a/packages/jest-runtime/src/lib/transform.js
+++ b/packages/jest-runtime/src/transform.js
@@ -11,20 +11,29 @@
 
 import type {Config, Path} from 'types/Config';
 
+const Resolver = require('jest-resolve');
+
 const createDirectory = require('jest-util').createDirectory;
 const crypto = require('crypto');
 const fs = require('graceful-fs');
 const path = require('path');
 const stableStringify = require('json-stable-stringify');
-
-const cache = new Map();
-const configToJsonMap = new Map();
-const preprocessorRegExpCache = new WeakMap();
+const vm = require('vm');
 
 export type Processor = {
-  process: (sourceText: string, sourcePath: string) => string,
+  process: (sourceText: string, sourcePath: Path) => string,
+};
+
+type TransformOptions = {
+  instrument: (source: string) => string,
 };
 
+const EVAL_RESULT_VARIABLE = 'Object.<anonymous>';
+
+const cache = new Map();
+const configToJsonMap = new Map();
+const ignoreCache = new WeakMap();
+
 const removeFile = (path: Path) => {
   try {
     fs.unlinkSync(path);
@@ -42,16 +51,14 @@ const getCacheKey = (
     // cached output instead of all config options.
     configToJsonMap.set(config, stableStringify({
       cacheDirectory: config.cacheDirectory,
+      collectCoverage: config.collectCoverage,
       haste: config.haste,
       mocksPattern: config.mocksPattern,
       moduleFileExtensions: config.moduleFileExtensions,
       moduleNameMapper: config.moduleNameMapper,
-      modulePathIgnorePatterns: config.modulePathIgnorePatterns,
       rootDir: config.rootDir,
-      testDirectoryName: config.testDirectoryName,
-      testFileExtensions: config.testFileExtensions,
       testPathDirs: config.testPathDirs,
-      testPathIgnorePatterns: config.testPathIgnorePatterns,
+      testRegex: config.testRegex,
     }));
   }
   const configStr = configToJsonMap.get(config);
@@ -65,18 +72,22 @@ const getCacheKey = (
   }
 };
 
-const writeCacheFile = (cachePath: string, fileData: string) => {
+const writeCacheFile = (cachePath: Path, fileData: string) => {
   try {
-    fs.writeFileSync(cachePath, fileData);
+    fs.writeFileSync(cachePath, fileData, 'utf8');
   } catch (e) {
-    e.message = 'jest: failed to cache preprocess results in: ' + cachePath;
+    e.message = 'jest: failed to cache transform results in: ' + cachePath;
     removeFile(cachePath);
     throw e;
   }
 };
 
-const readCacheFile = (filePath: string, cachePath: string): ?string => {
-  if (!fs.existsSync(cachePath)) {
+/* eslint-disable max-len */
+const wrap = content => '({"' + EVAL_RESULT_VARIABLE + '":function(module,exports,require,__dirname,__filename,global,jest,$JEST){' + content + '\n}});';
+/* eslint-enable max-len */
+
+const readCacheFile = (filePath: Path, cachePath: Path): ?string => {
+  if (!Resolver.fileExists(cachePath)) {
     return null;
   }
 
@@ -84,7 +95,7 @@ const readCacheFile = (filePath: string, cachePath: string): ?string => {
   try {
     fileData = fs.readFileSync(cachePath, 'utf8');
   } catch (e) {
-    e.message = 'jest: failed to read preprocess cache file: ' + cachePath;
+    e.message = 'jest: failed to read cache file: ' + cachePath;
     removeFile(cachePath);
     throw e;
   }
@@ -97,32 +108,40 @@ const readCacheFile = (filePath: string, cachePath: string): ?string => {
   return fileData;
 };
 
-module.exports = (filePath: Path, config: Config): string => {
-  const mtime = fs.statSync(filePath).mtime;
-  const mapCacheKey = filePath + '_' + mtime.getTime();
+module.exports = (
+  filename: Path,
+  config: Config,
+  options: ?TransformOptions,
+): vm.Script => {
+  const mtime = fs.statSync(filename).mtime;
+  const mapCacheKey = filename + '_' + mtime.getTime();
 
   if (cache.has(mapCacheKey)) {
-    return cache.get(mapCacheKey) || '';
+    const content = cache.get(mapCacheKey);
+    if (content) {
+      return content;
+    }
   }
 
-  let fileData = fs.readFileSync(filePath, 'utf8');
+  let content = fs.readFileSync(filename, 'utf8');
   // If the file data starts with a shebang remove it. Leaves the empty line
   // to keep stack trace line numbers correct.
-  if (fileData.startsWith('#!')) {
-    fileData = fileData.replace(/^#!.*/, '');
+  if (content.startsWith('#!')) {
+    content = content.replace(/^#!.*/, '');
   }
 
-  if (!preprocessorRegExpCache.has(config)) {
-    preprocessorRegExpCache.set(
+  if (!ignoreCache.has(config)) {
+    ignoreCache.set(
       config,
       new RegExp(config.preprocessorIgnorePatterns.join('|')),
     );
   }
-  const regex = preprocessorRegExpCache.get(config);
+
   if (
     config.scriptPreprocessor &&
     (
-      !config.preprocessorIgnorePatterns.length || !regex.test(filePath)
+      !config.preprocessorIgnorePatterns.length ||
+      !ignoreCache.get(config).test(filename)
     )
   ) {
     // $FlowFixMe
@@ -133,29 +152,41 @@ module.exports = (filePath: Path, config: Config): string => {
       );
     }
 
-    if (config.cache === true) {
-      const baseCacheDir = path.join(config.cacheDirectory, 'preprocess-cache');
-      const cacheKey = getCacheKey(preprocessor, fileData, filePath, config);
-      // Create sub folders based on the cacheKey to avoid creating one
-      // directory with many files.
-      const cacheDir = path.join(baseCacheDir, cacheKey[0] + cacheKey[1]);
-      const cachePath = path.join(
-        cacheDir,
-        path.basename(filePath, path.extname(filePath)) + '_' + cacheKey,
-      );
-      createDirectory(cacheDir);
-      const cachedData = readCacheFile(filePath, cachePath);
-      if (cachedData) {
-        fileData = cachedData;
-      } else {
-        fileData = preprocessor.process(fileData, filePath, config);
-        writeCacheFile(cachePath, fileData);
-      }
+    const baseCacheDir = path.join(config.cacheDirectory, 'preprocess-cache');
+    const cacheKey = getCacheKey(preprocessor, content, filename, config);
+    // Create sub folders based on the cacheKey to avoid creating one
+    // directory with many files.
+    const cacheDir = path.join(baseCacheDir, cacheKey[0] + cacheKey[1]);
+    const cachePath = path.join(
+      cacheDir,
+      path.basename(filename, path.extname(filename)) + '_' + cacheKey,
+    );
+    createDirectory(cacheDir);
+
+    const cacheData = config.cache ? readCacheFile(filename, cachePath) : null;
+    if (cacheData) {
+      content = cacheData;
     } else {
-      fileData = preprocessor.process(fileData, filePath, config);
+      content = preprocessor.process(content, filename, config);
+      if (options && options.instrument) {
+        content = options.instrument(content);
+      }
+      content = wrap(content);
+      writeCacheFile(cachePath, content);
     }
+  } else if (options && options.instrument) {
+    content = wrap(options.instrument(content));
+  } else {
+    content = wrap(content);
   }
 
-  cache.set(mapCacheKey, fileData);
-  return fileData;
+  const script = new vm.Script(content, {
+    displayErrors: true,
+    filename,
+  });
+
+  cache.set(mapCacheKey, script);
+  return script;
 };
+
+module.exports.EVAL_RESULT_VARIABLE = EVAL_RESULT_VARIABLE;
diff --git a/packages/jest-snapshot/.npmignore b/packages/jest-snapshot/.npmignore
index e31125afcece..85e48fe7b0a4 100644
--- a/packages/jest-snapshot/.npmignore
+++ b/packages/jest-snapshot/.npmignore
@@ -1,3 +1,3 @@
-__tests__
-__mocks__
+**/__mocks__/**
+**/__tests__/**
 src
diff --git a/packages/jest-snapshot/package.json b/packages/jest-snapshot/package.json
index 8e733f7354b8..84ae85aa64c4 100644
--- a/packages/jest-snapshot/package.json
+++ b/packages/jest-snapshot/package.json
@@ -11,11 +11,12 @@
     "jest-util": "^13.2.2",
     "pretty-format": "^3.4.3"
   },
-  "scripts": {
-    "test": "../jest-cli/bin/jest.js"
-  },
   "jest": {
-    "rootDir": "./build",
+    "rootDir": "./src",
+    "scriptPreprocessor": "../../babel-jest",
     "testEnvironment": "node"
+  },
+  "scripts": {
+    "test": "../jest-cli/bin/jest.js"
   }
 }
diff --git a/packages/jest-util/.npmignore b/packages/jest-util/.npmignore
index e31125afcece..85e48fe7b0a4 100644
--- a/packages/jest-util/.npmignore
+++ b/packages/jest-util/.npmignore
@@ -1,3 +1,3 @@
-__tests__
-__mocks__
+**/__mocks__/**
+**/__tests__/**
 src
diff --git a/packages/jest-util/package.json b/packages/jest-util/package.json
index 0a770758c5b1..3af06cd52988 100644
--- a/packages/jest-util/package.json
+++ b/packages/jest-util/package.json
@@ -18,7 +18,8 @@
     "jsdom": "^9.2.1"
   },
   "jest": {
-    "rootDir": "./build",
+    "rootDir": "./src",
+    "scriptPreprocessor": "../../babel-jest",
     "testEnvironment": "node"
   },
   "scripts": {
diff --git a/packages/jest/.npmignore b/packages/jest/.npmignore
new file mode 100644
index 000000000000..85e48fe7b0a4
--- /dev/null
+++ b/packages/jest/.npmignore
@@ -0,0 +1,3 @@
+**/__mocks__/**
+**/__tests__/**
+src
diff --git a/scripts/build.js b/scripts/build.js
index a15f26a1c463..6c802544157e 100644
--- a/scripts/build.js
+++ b/scripts/build.js
@@ -33,6 +33,12 @@ const JS_FILES_PATTERN = '**/*.js';
 const IGNORE_PATTERN = '';
 const PACKAGES_DIR = path.resolve(__dirname, '../packages');
 
+const babelOptions = JSON.parse(fs.readFileSync(
+  path.resolve(__dirname, '..', '.babelrc'),
+  'utf8'
+));
+babelOptions.babelrc = false;
+
 function buildPackage(p) {
   const srcDir = path.resolve(p, SRC_DIR);
   const pattern = path.resolve(srcDir, '**/*');
@@ -65,14 +71,7 @@ function buildFile(file) {
       '\n'
     );
   } else {
-    const transformed = babel.transformFileSync(file, {
-      plugins: [
-        'syntax-trailing-function-commas',
-        'transform-flow-strip-types',
-      ],
-      retainLines: true,
-      babelrc: false,
-    }).code;
+    const transformed = babel.transformFileSync(file, babelOptions).code;
     spawnSync('mkdir', ['-p', path.dirname(destPath)]);
     fs.writeFileSync(destPath, transformed);
     process.stdout.write(
diff --git a/scripts/test.js b/scripts/test.js
index fee34308638b..8fe9120e0206 100644
--- a/scripts/test.js
+++ b/scripts/test.js
@@ -28,7 +28,9 @@ const rimraf = require('rimraf');
 const EXAMPLES_DIR = path.resolve(__dirname, '../examples');
 const INTEGRATION_TESTS_DIR = path.resolve(__dirname, '../integration_tests');
 const JEST_CLI_PATH = path.resolve(__dirname, '../packages/jest-cli');
+const VERSION = require('../lerna').version;
 
+const packages = getPackages();
 
 const examples = fs.readdirSync(EXAMPLES_DIR)
   .map(file => path.resolve(EXAMPLES_DIR, file))
@@ -43,20 +45,30 @@ function runExampleTests(exampleDirectory) {
   console.log(chalk.bold(chalk.cyan('Testing example: ') + exampleDirectory));
 
   runCommands('npm update', exampleDirectory);
-  rimraf.sync(path.resolve(exampleDirectory, './node_modules/jest-cli'));
-  mkdirp.sync(path.resolve(exampleDirectory, './node_modules/jest-cli'));
-  mkdirp.sync(path.resolve(exampleDirectory, './node_modules/.bin'));
-
-  // Using `npm link jest-cli` can create problems with module resolution,
-  // so instead of this we'll create an `index.js` file that will export the
-  // local `jest-cli` package.
-  fs.writeFileSync(
-    path.resolve(exampleDirectory, './node_modules/jest-cli/index.js'),
-    `module.exports = require('${JEST_CLI_PATH}');\n`, // link to the local jest
-    'utf8'
-  );
+  packages.forEach(pkg => {
+    const name = path.basename(pkg);
+    const directory = path.resolve(exampleDirectory, 'node_modules', name);
+
+    if (fs.existsSync(directory)) {
+      rimraf.sync(directory);
+      mkdirp.sync(directory);
+      // Using `npm link jest-*` can create problems with module resolution,
+      // so instead of this we'll create a proxy module.
+      fs.writeFileSync(
+        path.resolve(directory, 'index.js'),
+        `module.exports = require('${pkg}');\n`,
+        'utf8'
+      );
+      fs.writeFileSync(
+        path.resolve(directory, 'package.json'),
+        `{"name": "${name}", "version": "${VERSION}"}\n`,
+        'utf8'
+      );
+    }
+  });
 
   // overwrite the jest link and point it to the local jest-cli
+  mkdirp.sync(path.resolve(exampleDirectory, './node_modules/.bin'));
   runCommands(
     `ln -sf ${JEST_CLI_PATH}/bin/jest.js ./node_modules/.bin/jest`,
     exampleDirectory
@@ -65,8 +77,7 @@ function runExampleTests(exampleDirectory) {
   runCommands('npm test', exampleDirectory);
 }
 
-
-getPackages().forEach(runPackageTests);
+packages.forEach(runPackageTests);
 
 if (packagesOnly) {
   return;
diff --git a/scripts/watch.js b/scripts/watch.js
index be648a6def1e..06594708f6aa 100644
--- a/scripts/watch.js
+++ b/scripts/watch.js
@@ -22,6 +22,12 @@ const BUILD_CMD = `node ${path.resolve(__dirname, './build.js')}`;
 
 let filesToBuild = new Map();
 
+const exists = filename => {
+  try {
+    return fs.statSync(filename).isFile();
+  } catch (e) {}
+  return false;
+};
 const rebuild = filename => filesToBuild.set(filename, true);
 
 getPackages().forEach(p => {
@@ -29,9 +35,25 @@ getPackages().forEach(p => {
   try {
     fs.accessSync(srcDir, fs.F_OK);
     fs.watch(path.resolve(p, 'src'), {recursive: true}, (event, filename) => {
-      if (event === 'change' || event === 'rename') {
+      const filePath = path.resolve(srcDir, filename);
+
+      if (
+        (event === 'change' || event === 'rename') &&
+        exists(filePath)
+      ) {
         console.log(chalk.green('->'), `${event}: ${filename}`);
-        rebuild(path.resolve(srcDir, filename));
+        rebuild(filePath);
+      } else {
+        const buildFile = path.resolve(srcDir, '..', 'build', filename);
+        try {
+          fs.unlinkSync(buildFile);
+          process.stdout.write(
+            chalk.red('  \u2022 ') +
+            path.relative(path.resolve(srcDir, '..', '..'), buildFile) +
+            ' (deleted)' +
+            '\n'
+          );
+        } catch (e) {}
       }
     });
   } catch (e) {
diff --git a/types/Config.js b/types/Config.js
index de01da28e707..740fd2728d61 100644
--- a/types/Config.js
+++ b/types/Config.js
@@ -55,6 +55,7 @@ export type Config = BaseConfig & {
   cache: boolean,
   collectCoverageOnlyFrom: {[key: string]: Path},
   colors: boolean,
+  collectCoverage: boolean,
   coverageThreshold: {
     global: {
       [key: string]: number,
diff --git a/types/Environment.js b/types/Environment.js
index e0dbf3d4e26c..fc8ac500dc8b 100644
--- a/types/Environment.js
+++ b/types/Environment.js
@@ -11,11 +11,12 @@
 
 import type {Config} from './Config';
 import type {Global} from './Global';
+import type {Script} from 'vm';
 
 export type Environment = {
   constructor(config: Config): void;
   dispose(): void;
-  runSourceText(sourceText: string, filename: string): any;
+  runScript(script: Script): any;
   global: Global;
   fakeTimers: {
     clearAllTimers(): void;